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MarkWest Inks Anadarko Deal

MarkWest Energy Partners L.P. (MWE) entered into long-term service agreements with Anadarko Petroleum Corporation (APC). None of the companies disclosed the financial terms of the deals.

Per the agreement, MarkWest will extend gathering and processing services from its facility in East Texas for the development of Anadarko’s liquids rich assets within Panola County.

Denver, Colorado-based MarkWest recently announced plans to set up a 120 million cubic feet per day (MMcf/d) cryogenic processing capacity Carthage East plant. With this unit, the total processing capacity in East Texas will reach 400 MMcf/d. This expansion work has been undertaken in view of rendering high-class midstream services to producer customers engaged in exploration activities in the region.

In this regard, MarkWest has signed significant agreements with companies operating in the region such as Chevron Corporation (CVX), PetroQuest Energy (PQ) and Samson Lone Star, LLC.

This collaboration between MarkWest and Anadarko is expected to strengthen the position of the former in East Texas and lend support to the expansion program.

MarkWest is a master limited partnership engaged in the gathering, processing and transmission of natural gas, transportation, fractionation and storage of natural gas liquids, and the gathering and transportation of crude oil.

We are maintaining a long-term Neutral rating on the stock. MarkWest currently retains a Zacks #3 Rank, which is equivalent to a short-term Hold rating.

We continue to like MarkWest for its high-quality and diverse portfolio of midstream assets that generate stable and recurring revenues by way of long-term fee-based contracts, as well as its proven track record of supporting producers in the growth of shale plays.

Additional positives in the MarkWest story include accelerating demand for natural gas liquids, an active hedging policy and steady improvement in its liquidity and cash flow position.

However, due to the volatile nature of the natural gas processing business, we do not see any significant price upside for MarkWest units over the next few quarters. We expect the partnership to grow at a somewhat more conservative and sustainable pace.